Brazil Refuses To Buy European Bonds, Dashing Hopes For A BRIC-based European Rescue

Tyler Durden's picture

About a year ago, we speculated that as part of the ongoing currency warfare between Brazil and the "developed" world, its finance minister Guido Mantega would keep his trade surplus trump card until the moment of biggest impact. That moment has come, after the financial head (with the Playboy-posing daughter) just told Europe to take a hike. "I believe that European countries do not need funds from Brazil to buy bonds. Brazil is not considering it," Mantega told reporters in Brasilia. "They have to find solutions to the European problems within Europe." And with Brazil out, it is certain that China will not step up over fears of appearing weak and needing to provide vendor financing to its biggest export partner. Unfortunately for Europe this means that at least one component of the revised SPIV: that which foresees public investment from third parties into the EFSF (a new twist proposed only last week), can now be safely forgotten, bringing us back to page one and the entire 5x levered CDO structure which as has been explained numerous times, is Dead on Arrival. There is, however, one loophole. "Mantega said Brazil would be willing to provide financial help via the International Monetary Fund." Which is rather laughable considering that by IMF, one typically refers to, at least in polite society, Uncle Sam. Then again, with a French woman (and one who until recently was solely reponsible for the grave French financial condition) in charge, it is easy to lose sight and to be, there is that phrase again, baffled by irrelevant bullshit even as following the bailout money always lead to the same old source.

Reuters reports:

Brazil on Tuesday rejected the idea of buying European bonds to help ease the euro zone's debt crisis, casting doubt on a plan for major emerging market economies to offer fresh funds for the continent's rescue.

 

European leaders had floated the idea that developing nations including Brazil and China could provide funding to buy Euro zone bonds, which would help lower yields and ease pressure on countries such as Spain and Italy.

 

But Brazilian Finance Minister Guido Mantega echoed calls for Europe to solve its own burgeoning fiscal problems, saying Brazil had no intention of making such purchases.

 

Brazilian officials earlier this year floated a plan to buy European debt along with members of the BRICS group of nations, which includes Russia, China, India and South Africa, but backed away after tepid response from the group.

It's not just Brazil:

India and Russia are not interested in offering more funds to help Europe while there was not evidence China planned to chip in, a high ranking official from an emerging market country told Reuters. The official said major emerging powers believe Europe is not doing enough to find a solution to the crisis amid internal bickering.

That said, as we reported yesterday, the IMF is already preparing to activate desperate measures to bail out the world, once Europe, inevitably, fails in pulling itself out of the quicksand by its bootstraps. Needless to say that with the countries who can actually afford to participate in the rescue backing out, the onus of bailing out the world, once again falls squarely on the shoulders of the American middle class. And with the political climate already "challenged" as is, it will be quite interesting to observe as the GOP incorporates the topic of the hundreds of billions of taxpayer capital that will be exposed to first loss in order to make sure that Europeans do not experience the kind of dire austerity that will see Italians retiring at 67 instead of 65, in the hourly presidential debates.